"Shell pays a quarterly dividend that its management team has said it would like to increase every year by more than the inflation rate. Since 2006 the quarterly payment has increased from US$0.556 to US$0.80 per share -- a rise of +44% in only three years.

"The US$0.80 per quarter payments translate into a yearly total of US$3.20 and a yield of 5.8% at current prices.U.S. investors are subject to a 15% dividend withholding tax. This amount can be recovered via a foreign tax credit.

"Shell's balance sheet is very strong, and the company carries a AA+ rating by Standard & Poor's. In addition, the company's debt-to-capitalization ratio is less than 25%. Shell also generates very strong cash flow and regularly engages in share repurchases.

"Although lower oil prices hurt the company's exploration and production profits, it benefits the 'downstream' businesses -- refiners and gas stations.

"This diversification should mean cash flows will remain solid in 2009. Meanwhile, Shell's investments in alternative sources of oil and gas should pay off in the coming years, as conventional sources become harder to find.

"In a sense, Shell is a comeback story. In 2004, the company was forced to lower its production estimates due to disappointing investments. Since then, it has aggressively been playing catch up, with industry-leading research and development spending -- and the investments are starting to pay off.

"Shell's strong balance sheet -- one of the best in the oil industry -- will protect it from a prolonged period of low crude/natural gas prices and should help it maintain its dividend.

"This is one of the more conservative plays on a falling dollar and a rebound in oil and gas prices. Although the yield isn't sky-high, it's better protected by cash flows than that of some other large integrated oil companies."

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